As housing prices in Jewish state soar, Israelis invest $500 million in New York apartments and $400 million in offices and stores. 'We must return these investors to Israel,' says Housing Ministry official

Ofer Petersburg |Published: 06.02.13 , 14:40

Housing prices in Israel
continue to soar, pushing Israelis to invest in real estate overseas: Israeli investments in New York recorded a dramatic increase of 25% last year.

Throughout 2012, Israelis bought 300 apartments in New York City, particularly in the Harlem neighborhood and northern Manhattan, estimated at a total value of some $500 million. In addition, Israelis purchased commercial real estate in the Big Apple for a total of $400 million.

These are not just private investors, but companies and institutions as well.

"It's a great concern," a senior Housing Ministry official told Yedioth Ahronoth. "The new government must restore investors' faith.

"The Treasury drove investors and their money away from Israel, and rent prices jumped up. Now, the capital for investment in housing in Israel's big cities must be returned in order to increase the supply of apartments for rent. It's the only way to bring rent prices down."

According to Jacky Mukmel, CEO of MAN Properties which is affiliated with the world's largest commercial real estate agency – CBRE Group, dozens of Israeli businesspeople have discovered New York's potential in the field of commercial real estate in the past year, particularly in shopping centers and offices.

In the apartment area, estimates are that about 80% of the Israelis bought the New York flats for investment purposes, while the rest purchased them for accommodation during business trips to New York.

According to Shimon Shkury, president of Ariel Properties, which invests in New York on behalf of its Israeli clients, the number of Israelis entering New York's real estate market as investors has been on the rise since 2008.

"The Israeli investors can be divided into those who are interested in small investments, purchasing one apartment or two, and those who join purchase groups with local entrepreneurs, some of whom are former Israelis, and buy apartment buildings together," he said.

Significant increase in rent

Ariel Properties' figures show that the number of transactions in the market of apartment buildings for investment purposes in New York increased by 36% in 2012. A total of 639 transactions were carried out throughout the year, which included the purchase of 964 apartment buildings at a total sum of $7.8 billion.

This number reflects a sharp rise from 2011, which recorded a total of 470 transactions in which 679 properties were sold for a total of some $5 billion.

According to Shkury, the main reasons for the rise in sales of apartment buildings for investment purposes in New York is the significant increase in rent, as well as the mortgage interest rate which is at an all-time low.

In order to speed up construction for Israeli investors, Hap Investments has hired world renowned designer Karim Rashid and is offering apartments in northern Manhattan for $320,000 and more.

According to CEO Nir Amsel, the supply of apartment for sale in Manhattan reached an all-time low in the last quarter of 2012 with 4,749 apartments for sale compared to 7,221 in the same quarter the previous year – a 34% drop.

The supply of new apartments plummeted as well, from 1,490 in the fourth quarter of 2011 to 882 in the fourth quarter of 2012.